Category Archives: Trade

Globalization and its New Discontents by Joseph E. Stiglitz – Project Syndicate

Branko Milanovic’s new book Global Inequality: A New Approach for the Age of Globalization provides some vital insights, looking at the big winners and losers in terms of income over the two decades from 1988 to 2008. Among the big winners were the global 1%, the world’s plutocrats, but also the middle class in newly emerging economies. Among the big losers – those who gained little or nothing – were those at the bottom and the middle and working classes in the advanced countries. Globalization is not the only reason, but it is one of the reasons.

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Under the assumption of perfect markets (which underlies most neoliberal economic analyses) free trade equalizes the wages of unskilled workers around the world. Trade in goods is a substitute for the movement of people. Importing goods from China – goods that require a lot of unskilled workers to produce – reduces the demand for unskilled workers in Europe and the US.

Globalization and its New Discontents by Joseph E. Stiglitz – Project Syndicate

Japan exports slump to financial crisis lows | Business | DW.COM

‘Disaster waiting to happen’

The latest data adds to growing concerns that Japanese authorities are increasingly left with few options to revive a stumbling economy even as the Bank of Japan remains proactive in policymaking, shocking markets last month by adopting negative interest rates to spark momentum.

The country’s
economy contracted an annualized 1.4 percent in October-December. While analysts expect a return to moderate growth in the current quarter, sluggish exports and weak consumer spending underscore the difficulty policy makers have in putting the economy back on track.

“Japan’s January trade figures were woeful… This is more fodder for those who think Japan’s economy is a disaster waiting to happen,” Chris Weston, Melbourne-based chief market strategist at IG, wrote in an email to clients.

Japan exports slump to financial crisis lows | Business | DW.COM | 18.02.2016

Review: Trade can bring war

The First World War taught that economic interconnections created national vulnerability. Economic self-sufficiency was seen as a potential solution. Autarky appealed to military strategists in both Nazi Germany and Japan in the 1930s – and was even supported at the time by that economic weather vane, John Maynard Keynes.

Among the war aims of both Germany and Japan was a desire to establish self-sufficient economic blocks. Yet Japan’s moves to construct its so-called “Greater Asia Co-Prosperity Sphere” threatened U.S. supplies of rubber and tin, and after Japan moved military forces into Indochina, America restricted Japan’s oil supplies. The Japanese replied in turn by bombing Pearl Harbor. “When the overlay of racial barbarity is removed from the Second World War,” writes Macdonald, “what remains is a struggle for resources.”

The rise of China, in Macdonald’s view, threatens to undermine America’s global hegemony and bring to an end the Pax Americana. The parallels with the rise of Imperial Germany over a century ago are worrisome, to say the least. Meanwhile, the antics of Putin’s revanchist Russia suggest historical analogues of a 1930s vintage, as the UK’s Prince Charles has imprudently observed.

When Globalization Fails” is a scholarly and readable account of how economic development and trade can exacerbate geopolitical tensions. It deserves to be read in the corridors of power, from Washington to Beijing. After all, the best hope of avoiding a repetition of past catastrophes lies in understanding how they came about.

Review: Trade can bring war

Connectiveness between countries means that problems can be transmitted more easily. And that just makes things worse. Note both that Russia and China have trade issues. Russia is being sanctioned by the West. China has to worry about America cutting it off.

When Globalization Fails: The Rise and Fall of Pax Americana – Books


Taking this question as its starting point, James Macdonald’s When Globalization Fails offers a rich, original account of war, peace, and trade in the twentieth century—and a cautionary tale for the twenty-first.

In the late nineteenth century, liberals exulted that the spread of international commerce would usher in prosperity and peace. An era of economic interdependence, they believed, would render wars too costly to wage. But these dreams were dashed by the carnage of 1914–1918. Seeking the safety of economic self-sufficiency, nations turned first to protectionism and then to territorial expansion in the 1930s—leading again to devastating conflict. Following the Second World War, the globalists tried once more. With the communist bloc disconnected from the global economy, a new international order was created, buttressing free trade with the informal supremacy of the United States. But this benign period is coming to an end.

According to Macdonald, the global commerce in goods is a mixed blessing. It makes nations wealthier, but also more vulnerable. And while economic interdependence pushes toward cooperation, the resulting sense of economic insecurity pulls in the opposite direction—toward repeated conflict. In Macdonald’s telling, the First World War’s naval blockades were as important as its trenches, and the Second World War can be understood as an inevitable struggle for vital raw materials in a world that had rejected free trade. Today China’s economic and military expansion is undermining the Pax Americana that had kept economic insecurities at bay, threatening to resurrect the competitive multipolar world of the early twentieth century with all its attendant dangers. Expertly blending political and economic history and enlivened by vivid quotation, When Globalization Fails recasts what we know about the past and raises vital questions about the future.

When Globalization Fails: The Rise and Fall of Pax Americana: James Macdonald: 9780374229634: Books

Sanctions bind Russia’s energy elite to Putin | Reuters

Far from dividing those closest to President Vladimir Putin, they have forced the main players in the energy sector to rally behind him. This circle has by necessity become more focused, Western and Russian businessmen, diplomats and politicians said.

“They are defiant,” said a senior Western businessman who has access to some of the business and political leaders targeted by sanctions. He asked not to be identified because of the political sensitivity of the subject.

“The sanctions have brought consolidation and have made his inner circle only more dependent on him.”

The influence of more liberal thinkers in the government has been curtailed, sources close to decision-making say, including in the vital energy sector. The already small inner core of decision-makers has shrunk even further.

“We underestimated the Russian reaction,” said a Western envoy based in Moscow who spoke on condition of anonymity.

Sanctions bind Russia’s energy elite to Putin | Reuters

Why Sanctions on Russia Won´t Work Like Sanctions on Iran

“The United States, in turn, is looking to step up its own game. Policymakers are considering giving global companies a choice: stop providing long-term financing and energy assistance to major Russian companies or be kicked out of the U.S. financial system.”

With sanctions beginning to bite, Russia is starting to play a new economic game. To alleviate the pain of Western restrictions on its financial and energy sectors, Russia is turning for help to non-Western partners. Last week alone, Russia and China signed over 40 agreements that provide Russian firms with lines of credit worth billions of dollars and establish strategic partnerships in the energy sector.

The United States, in turn, is looking to step up its own game. Policymakers are considering giving global companies a choice: stop providing long-term financing and energy assistance to major Russian companies or be kicked out of the U.S. financial system. Such measures resemble the sanctions the United States placed on Iran a couple of years ago. But Iran was a different problem. And treating Russia the same way would be a mistake.

Sanctions can be an effective tool for forcing engagement and negotiation. But the pace and implementation must be tailored to the target. In the case of Iran, the United States was able to tighten the screws by pressuring foreign firms to stop dealing with the country. That move created some angry blowback, but it generally worked. And partially as a result, Tehran is at the negotiating table. When it comes to Russia, though, the political pushback that would come from blacklisting dealings with the strategic Russian energy and banking sectors would be much more severe because Russia is a more important market. Further, more companies would likely be willing to forego access to U.S. markets in order to continue working with the Russians. And that would undermine the sanctions’ effectiveness.

Eric Lorber and Elizabeth Rosenberg | Don’t Mistake Russia for Iran | Foreign Affairs

New EU Sanctions to Stop Fundraising by 3 Russian Oil Giants – WSJ

New European Union sanctions on Russia will expand the number of Russian companies unable to raise money in the bloc’s capital markets to include three major state-owned oil companies, according to documents seen by The Wall Street Journal.

Under a modest expansion of sanctions introduced in late July, the three oil companies— Gazpromneft, the oil-production and refining subsidiary of OAO Gazprom, oil transportation company Transneft, and oil giant Rosneft—will be forbidden from raising funds of longer than 30 days’ maturity.

The documents show the EU seeking to hit Russian oil companies, but leaving unscathed those involved in gas production and export, which are critical to many European countries’ energy supplies.

New EU Sanctions to Stop Fundraising by 3 Russian Oil Giants – WSJ

Will Putin cut off gas in return? What about just cutting it off during the winter?

Russia Economy In Trouble, Official Says

Not too long ago, top dogs within the Russian government said Western sanctions were not going to hurt. A couple of months later, reality has settled in.

Russia’s Economic Development Minister, Alexei Ulyukayev, said the economy had many obstacles and entered a negative growth cycle. In an op-ed published in the Vedomosti newspaper Monday, Ulyukayev wrote, “ It could be said that we have entered a negative stage of the economic cycle. Lack of demand is a significant obstacle on the way to restoring steady growth.”

Russia’s economy was slapped with sanctions from Brussels to Washington starting in March because of the country’s involvement with the ongoing civil unrest in eastern Ukraine. The sanctions began immediately after Russia annexed an important piece of Ukrainian real estate, the Crimea peninsula in the Black Sea, home to historic cities like Yalta and Russia’s Black Sea Fleet. Crimea, then an autonomous region of Ukraine, voted to secede following the toppling of the pro-Russia government in Kiev led by Viktor Yanukovych.

Russia Economy In Trouble, Official Says

Putin Picks the Worst of All Bad Choices | The Jamestown Foundation

That counter-strike against Western pressure appeared far off-target, and the Russian blogosphere exploded with jokes about Putin following the US leadership in imposing sanctions against Russia (BestToday, August 9). Yet, there were also serious reasons to expect a forceful move from Moscow in the theater of combat operations, where the rebels are in retreat across many localities, concentrating their war-bands on defending the strongholds in Donetsk and Luhansk (, August 6). Russia initiated two meetings of the United Nations Security Council last week, presenting the case for alleviating the “humanitarian catastrophe” in eastern Ukraine by delivering emergency aid, which would be protected by Russian “peacekeeping forces”; Moscow even began preparing a powerful convoy for the task (, August 9). Many member states of the North Atlantic Treaty Organization (NATO) saw in that “humanitarianism” an attempt to camouflage a military intervention, and the US issued a strong warning about the consequences of such an unacceptable escalation of hostilities (RIA Novosti, August 9).

Putin Picks the Worst of All Bad Choices | The Jamestown Foundation

BBC News – Ukraine conflict: US and EU widen sanctions on Russia

US President Barack Obama has announced new economic sanctions against Russia, saying they will make Russia’s “weak economy even weaker”.

He said the co-ordinated actions of the US and European Union would “have an even bigger bite” on Russia’s economy.

The new restrictions include banning Americans or people in the US from banking with three Russian banks.

The aim is to increase the cost to Russia of its continued support for pro-Moscow rebels in eastern Ukraine.

Moscow denies charges by the EU and US that it is supplying heavy weapons to the rebels.

BBC News – Ukraine conflict: US and EU widen sanctions on Russia

European Union unveils ‘tough’ new sanctions on Russia, including arms embargo | Mail Online

The 28-nation bloc has imposed an arms embargo, banking curbs and a ban on trade in sensitive and dual-use technologies to punish Russia for its actions in its neighbouring country.

Two diplomats told the Associated Press the measures were decided today at a meeting of EU ambassadors. A further eight Russians will also face asset freezes and travel bans.

The new EU sanctions came as John Kerry, U.S. Secretary of State, warned that Washington is also drawing up fresh sanctions against its old enemy.

‘We are in the process of preparing additional sanctions, with Europe,’ Mr Kerry told reporters, shortly after meeting with new Ukrainian Foreign Minister Pavlo Klimkin at the State Department.

But he added that Russian President Vladimir Putin ‘still has a choice going forward with respect to his ability to be able to have an impact with the separatists.’

European Union unveils ‘tough’ new sanctions on Russia, including arms embargo | Mail Online

This is getting interesting in a bad sort of way. I’m not really against this in principle, but I have a problem doing it with a gutted nuclear arsenal and downsized military. Are we directly pushing Russia toward a revolution? If we are going to do this then shouldn’t we be prepared (at least a little) if something goes wrong?

As a general principle for me, everything starts with a much bigger nuclear arsenal. Once that is established then by all means push Russia toward a revolution. And while you’re at it add China to the list. Just be careful before that bigger nuclear arsenal arrives.

It would appear that US and EU sanction pressure on Russia is pushing the world further in the direction of a great-power war. Russia just needs a good excuse. Will the Middle East provide it?

U.S. hits oil giant Rosneft, other firms with toughest Russia sanctions | Reuters

President Barack Obama imposed the biggest package of U.S. economic sanctions yet on Russia on Wednesday, hitting Russia’s largest oil producer Rosneft and other energy, financial and defense firms, with what he called significant but targeted penalties.

Obama’s latest round of sanctions came after close consultations with European leaders, who announced a less-ambitious package. The ultimate impact of the U.S. sanctions likely depends on whether the European Union follows suit.

The extent of the sanctions against key parts of the Russian energy and financial industry, including Gazprombank, was intended to serve notice to Moscow that its refusal to curb violence in eastern Ukraine has consequences.

U.S. hits oil giant Rosneft, other firms with toughest Russia sanctions | Reuters

The slow death squeeze continues. I wonder how long this can continue before Russia does something – like start a war?